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Review of tax administration for large businesses

David Francis David Francis

HMRC has published its response to the government's review of large businesses’ experiences of UK tax administration – announced in Spring Budget 2021. David Francis looks at HMRC’s direction of travel, including specific measures announced for 2022.

The government review of large businesses’ experiences of UK tax administration included a very welcome focus on supporting the UK’s competitiveness and promoting investment. HMRC’s response identifies three areas of focus: tax risk and certainty; compliance, enquiries and disputes; the co-operative compliance and Customer Compliance Manager (CCM) model.

HMRC has also said that the government looks forward to engaging further with stakeholders in designing and implementing the changes outlined.

Tax risk and certainty

HMRC has recognised an issue in difficulty accessing to advance rulings or clearances and the uncertainty this creates. Enquiries and other compliance interventions are not an efficient substitute for advance agreements for either businesses or HMRC.

At this stage, the initial mitigation proposed by HMRC is through investment to enable a programme of new “Guidelines for Compliance,” which will provide practical support and greater transparency on the approaches HMRC regards as higher or lower risk and the associated response. Further investment will be targeted at improving HMRC’s technical guidance to ensure this keeps pace with evolving complexity and hot topic issues triggering disputes. Both products should start to be delivered by mid to late 2022.

The measures provide the welcome prospect of additional confidence when reviewing tax policies or assessing the tax risks of transactions. We'll continue to help clients make the case for a wide ranging and well resourced clearance process alongside these.

Compliance, enquiries and disputes

HMRC has recognised the issue of enquiries tending to become lengthier and more onerous on businesses, with transfer pricing identified for particular attention. HMRC will therefore establish new, objective indicators of long-running enquiries and a clear and transparent process to accelerate their resolution. This is something we've been assisting our clients with for several years now based on a proactive approach to enquiry management and develop a relationship of trust and collaboration with HMRC teams, but it's great to see the underlying issues recognised and HMRC processes to mitigate these strengthened.

Where certain indicators are present, these processes will enable businesses to challenge long-running enquiries, or to facilitate their conclusion, with clear actions, outcomes and accountability on both sides. HMRC expects work to agree the indicators and process to take place in early 2022.

The co-operative compliance and Customer Compliance Manager (CCM) model

The issue recognised by HMRC here is primarily one of consistency. concerns raised in the consultation included a lack of clarity and transparency in HMRC’s governance processes and the ability of businesses to directly make representations into these and the experience and authority of CCMs.

HMRC makes a welcome commitment to build the feedback from the review into its training and development programmes, but the further actions in this area are less detailed and will be subject to additional consultation. This includes the very significant and pressing issue of the different level of service offered by HMRC to large businesses with a CCM as opposed to “mid-sized business” without any specific HMRC point of contact, many of whom comfortably meet all HMRC’s statutory definitions of a large business (such as falling within the SAO regime).

Additional measures

Following representations made about the potential for HMRC to expand digital “self service” solutions, HMRC indicates that company certificates of residence will be considered as a proof of concept for this type of delivery.

With cross-border disputes and issues of double taxation ever increasing, HMRC has indicated that it will review how HMRC approaches processes, such as MAP and APA to better support cross border trade and movements of business.

How we can help

Our team of experts can advise on the best approach to engaging with HMRC across the whole range of large businesses’ interactions from clearances, disclosures, business risk reviews, enquiries and MAP and APA processes to delays in routine correspondence. Whilst HMRC continues to work to improve its quality of service, our experience and professional insight can help bridge the gap.

Get in touch with David Francis if you have any questions about any aspect of HMRC’s engagement with large businesses. For questions about MAP and APA processes please contact Kirsty Rockall.

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